Asymmetric optimal hedge ratio with an application

Research output: Chapter in Book/Report/Conference proceedingConference contribution


The optimal hedge ratio (OHR) is an important tool for hedging against the price risk. A number of different approaches have been utilized in the literature in order to estimate the OHR, among others, constant parameter and time-varying approaches. One relevant question in this regard that has not been examined, to the best knowledge, is whether the OHR has an asymmetric structure or not. This issue is addressed in the current paper by mathematically proving that the OHR is asymmetric. Furthermore, we offer a method to deal with this asymmetry in the estimation of the underlying OHR. This method is applied to the US equity market using weekly spot and future share prices during the period January 5, 2006 to September 29, 2009. We find empirical evidence that supports the existence of an asymmetric OHR.

Original languageEnglish
Title of host publicationElectrical Engineering and Intelligent Systems
Number of pages7
Publication statusPublished - 2013
EventInternational Conference in Electrical Engineering and Intelligent Systems, (WCE 2011). - London, United Kingdom
Duration: Jul 6 2011Jul 8 2011

Publication series

NameLecture Notes in Electrical Engineering
Volume130 LNEE
ISSN (Print)1876-1100
ISSN (Electronic)1876-1119


OtherInternational Conference in Electrical Engineering and Intelligent Systems, (WCE 2011).
Country/TerritoryUnited Kingdom

ASJC Scopus subject areas

  • Industrial and Manufacturing Engineering


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